An Open Letter To Michael Cullen Re: The IMF

An Open Letter To Michael Cullen Re: The
IMF

From Stephen Tindall- the
womanMADENZ

Dear Dr Cullen

There is a
rumour circulating that the Labour Caucus has invited
economists from the International Monetary Fund, to New
Zealand.

One can only assume the IMF economists have been
invited under the preconception that they will endorse your
current economic policies, which after-all are a blue-print
of that which the IMF has prescribed to hundreds of other
nations throughout the world in exchange for desperately
needed funding.

Why you are seeking their approval is
perhaps a conundrum for those who falsely believe your
economic policies differ to those of National and ACT - two
parties who are flagrantly open in regard to their obeisance
with the IMF prescriptions. But to others, it merely
reinforces our belief that the current Labour government is
fundamentally no different than its predecessors.

Even the
Federal Reserve does not adhere to the IMF's advice. The IMF
economists felt, for instance, that inflation would start
rising in the United States as soon as unemployment fell
below 6%. On the other hand, the Council of Economic
Advisors thought otherwise. They were right and the IMF was
wrong: when unemployment in the United States fell to below
4%, inflation did not increase. Based on their faulty
analysis of the US economy, the IMF economists came up with
a misguided policy prescription: raise interest rates. The
Federal Reserve paid no attention to the IMF
recommendations.

Other countries have not been able to
ignore it so easily. However New Zealand can afford to
ignore the IMF, as to the best of my knowledge, we have
never owed them money nor allegiance.

In their original
conception at Bretton Woods after WW11, the IMF - a public
institution funded by taxpayers - and the World Bank, were
created in the recognition that markets often did not work
well - that they could result in massive unemployment and
might fail to make needed funds available to countries to
help them restore their economies. Sadly, during the 1980s
Thatcher/Reagan era, there was a dramatic change within
these two institutions when they became the new missionaries
that preached free market neo-liberal ideology, thus
overturning the underlying premise upon which the IMF and
the World Bank were founded.

Unlike developing countries,
New Zealand was not forced to take large doses of the IMF's
bitter pills. Nonetheless, your previous Labour government
with Roger Douglas as the Minister of Finance, did so
voluntarily. Apparently, plane loads of American officials
preaching their Washington Consensus ideologies, arrived en
masse in Wellington and convinced Douglas and his colleagues
that free market policies would do wonders for New
Zealanders.

We were all told at the time that we would
have to tighten our belts while we confronted the initial
pains for the promised gains. These turned out to be empty
promises and many of us are still feeling that pain.

We
saw privatisation of state funded assets that were sold at
fire-sale prices to off shore and local corporate interests
- only to be eventually locally headed by the loudest and
most vocal supporters for the privatisation of these assets
in the first place - the majority of whom were members of
the Business Round Table. They are of course keen
supporters for the IMF and everything it stands for -
including the sinister "structural unemployment" which
ensures them of a cheap labour force.

We watched in the
1980's as those IMF policies liberalised financial markets
and capital markets in order to serve the interests of
those entities moving money around the planet in pursuit of
the highest interest rates and most favourable exchange
rates.

We witnessed the elimination of barriers to
trade, resulting in the mass exodus of manufacturing jobs to
China and what is now the mass outsourcing of IT jobs to
India. Many of these jobs were replaced with student loans
and the unemployment benefit.

We also watched our well
paid jobs being replaced by low paid, part-time service
sector jobs which have grown as a percentage of the
workforce from 5.3% in 1983 to 29.7% in 2003. Many of these
part-time workers (though the Ministry of Social Development
cannot tell me exactly how many) are receiving employment
benefits and accommodation supplements from WINZ because the
wages and number of hours on offer are not sufficient to
survive upon.

We saw the national average wage increase
from $4.86 per hour in 1979 to $8.89 per hour in 2003, while
for the same period, the average house price increased from
$35,126 to $195,000. The result is, that while in 1979 with
interest rates at 10.86%, the interest payments alone for
the average NZ worker were 10.83% of their weekly wage. Now,
the weekly interest payments for the average worker to
purchase the average house accounts for 79% of their weekly
wage. I repeat, Dr Cullen, 79% of their weekly wage and
that does not include the principal. And therein lies our
problem.

Of course, the lending institutions are laughing
all the way to their overseas corporate banks, as the rise
and rise of our property prices translates to the rise and
rise of their dividends.

No doubt when they come to New
Zealand, this will be on the minds of the IMF economists who
are merely puppets for the global financial corporations and
can hardly be expected to criticise our national $74.2
billion (and growing) household sector debt to their
overseas masters.

While your salary and position may
immunise you from this reality, Dr Cullen - thousands of
families have been sickened by it and our exhausted social
services are now having to act as the ambulance at the
bottom of the cliff.

Sooner rather than later, those
cheap consumer goods from China will not be able to continue
to pacify the masses into a false sense of complacency and
well being.

Nor will those cheap imported goods be able
to mask the true level of inflation.

While our previous
Governor of the Reserve Banks tenure and $435,000 annual
salary was dependent upon maintaining an inflation rate that
did not exceed 2%, between June 1999 and June 2002, Dr
Brash and Treasury officials "modified" the content and
weightings of the Consumer Price Index (CPI) which, as you
know, is the main measure of inflation.

In an effort to
hide the real rise in inflation, the cost of sections (ie
land) was removed completely from the CPI. Rapidly rising
costs such as rent, cigarettes, childcare, new housing and
education had their CPI weightings lowered at a time when
they should have been increased. At the same time, the
weighting of cheap imported goods from China such as
footwear, clothing and household appliances have been
increased when they should have been decreased - afterall
aren't we supposed to be spending less on these products,
rather than more? This manipulation of the CPI can at best
be described as flawed and at worst be described as fraud.

While I have been told by an employee at the Reserve Bank
that the removal of the cost of land from the CPI has been
practised by central banks in other countries as well as New
Zealand, but recognised as an anomaly that may require
correcting, I will not hold my breath until such time as
they correct it. Why would these neo-liberal bankers correct
it? After-all, if the price of land was included in the CPI,
it would only expose the myth that free markets control
inflation, when in fact they do not.

Basically, Dr
Cullen, it is not going to take much longer for middle New
Zealand to start questioning how the official rate of
inflation has remained "stable" while their biggest expense
(land) has risen exponentially.

It won't take long
either, for our students to realise that they too have been
hoodwinked. As you know, we have a steady stream of
graduating students who have been told under the guise of a
so-called "knowledge wave" that their increased knowledge
and huge student debt will result in well paid New Zealand
jobs - jobs that will pay well enough to enable them to
fulfil every kiwis dream - that is to own their own home.

However the sector reporting the most notable increase
(11.5%) in full time equivalent employees in the year to
February 2003 was the real estate industry and I dare say
that this figure has grown even more since then. But
unfortunately for our graduating students, this industry
does not require tertiary qualifications, nor much more
knowledge beyond factoring in a sizeable commission for the
agent.

Nevertheless and albeit miraculously, there are
still 255,000 fulltime workers employed in New Zealand's
20,921 manufacturing businesses. Therefore, Dr Cullen, I
wish to remind you that your governments greatest PAYE
revenue is sourced from its manufacturers - not by real
estate agents and people making capital gains in the housing
sector.

Which begs the following questions. Why does this
government continue to reduce tariffs and choose not to
utilise the same defensive measures for our manufacturers,
as do the governments of our trading partners? And why is
this government not taking pragmatic and interventionist
steps to stem the growing tide of investment in the
non-productive and non-revenue-gathering housing market?

While I think I know the answer, I would rather hear it
from you, Dr Cullen.

All in all, the reality makes
complete and utter nonsense of the IMF neo-liberal
economists and their policies and for that reason I cannot
fathom why you have invited them here at the expense of the
average New Zealand worker.

If you see their policies as
a success, Dr Cullen, then let's have less of it.

But
please don't go down in history as yet another Minister of
Finance who took his hands off the economic wheel while
focusing instead on scoring political points against his
opponents, by making witty but facetious remarks in the
debating chamber.

I urge you, on behalf of the average
worker and our children, to take command Dr Cullen. Place
your hands firmly on the wheel, steer our ship to shark
infested waters, order those IMF economists to walk the
plank and then steer our ship safely home again to our
island paradise where no-one should be jobless nor live in
poverty.

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